Yesterday, Tuesday February 23rd, saw our last active covered call option contract closed on a standing limit order. We had sold a Square (SQ) call option contract (strike: $320; expiration: 5MAR2021) on February 4th for $149.30. On our date of initiation, SQ traded for $237.57. When our contract closed 19 days later SQ had appreciated three percent to $245 but were tumbling from recent highs with only two weeks to expiration. In hindsight I should have adjusted the standing limit order due to the contract’s proximity to expiration.
SQ has been a very successful position for us since shares were assigned due to a cash-covered short position that expired in-the-money on 13MAR2020. From our cost basis of $59 per share we have significant unrealized capital gain. Ideally, I’d like to realize a portion of the gain and redistribute some of the funds to other opportunities. Selling covered calls will force the liquidation of the position while earning a premium and effecting an execution price above the market. Once liquidated I plan to move our exposure to SQ to my wife’s tax-advantaged accounts while also selling more cash-covered puts on SQ (if contracts for strike prices below $150 are sufficiently valued by the market).